Valentine’s Day – Why Your Credit-Card Company Loves It

WASHINGTON--(BUSINESS WIRE)--Americans will spend an estimated $17 billion this year on Valentine’s
Day. The banks and credit-card companies will be doing lots of
celebrating, too.

That’s because for every box of chocolates, bouquet of flowers or
candle-lit dinner you buy, the bank that issued your credit card will
charge florists, chocolate shops and restaurants a “swipe fee” of
between 2 and 4 percent of the price to handle the transaction. Yet the
banks can do these transactions profitably for mere pennies.

Consider the average consumer, who – the National Retail Federation
estimates – will spend $130 for Valentine’s Day. At 2 percent, that’s
$2.60 in charges on goods and services that cost a mere fraction of that
amount. At 4 percent, it’s more than $5.

Spread just a 2-percent charge across $17 billion and it adds up to real
money – $340 million, or a third of a billion dollars. And that’s only
one relatively minor holiday.

Banks can charge these rates because the two biggest credit-card
companies, MasterCard and Visa, are a powerful duopoly. They each set
rates in secret that their banks charge and dictate unfair terms to
merchants, who must accept their credit cards to stay in business.

That means unfairly high costs for merchants (and retailing is a huge
industry whose health is critical to the economy) and, ultimately,
higher prices for consumers.

Because of the dysfunctional credit card market that Visa and MasterCard
have created, swipe fees are as much as eight times more on every
transaction in the U.S. than Europe. American families pay an estimated
average of more than $400 a year in swipe fees.

In a fair, transparent system that would look more like the rest of our
market-oriented economy, banks would set their rates openly and compete
against each other.

But they don’t, and consumers pay for it on Valentine’s Day and every
day of the year.

The Merchants Payments Coalition - UnfairCreditCardFees.com - is a
group of retailers, supermarkets, drug stores, convenience stores, fuel
stations, on-line merchants and other businesses who are fighting
against unfair credit card fees and fighting for a more competitive and
transparent card system that works better for consumers and merchants
alike. The coalition's member associations collectively represent about
2.7 million stores with approximately 50 million employees.